Here’s why measuring inclusive prosperity is crucial for building successful cities

Bilbao. Image: Getty.

Two major trends are shaping the economies of cities around the world today.

Firstly, rapid urbanisation. Globally, people are flocking to cities in search of jobs and a better quality of life. Just over half the world’s population currently live in urban areas and the UN says this will increase to two thirds by 2050. We will also witness the continual rise of ‘megacities’, with more than 40 cities containing 10 million-plus inhabitants across the globe within a decade.

The second trend is growing global inequality. According to the World Inequality Report, the top 1 per cent of earners, since 1980, have captured more than double the slice of economic growth than the poorest 50 per cent of individuals. The result is an alarming situation now, where 26 billionaires have more wealth than the poorest half of humanity, who live on less than $5.50 (£4.25) a day. And in many places, this inequality has only been exacerbated by regressive tax systems, such as in Britain, where the richest 10 per cent pay less tax as a proportion of their income than the poorest 10 per cent.

Fast-growing populations coupled with extreme inequality is simply unsustainable for cities. In order to thrive, they must not only create prosperity but greater inclusion as well.

For several decades, economic progress has been principally judged on the basis of Gross Domestic Product (GDP), which measures levels of economic activity. But this is a crude benchmark which tells an incomplete story. It may show which cities are the most wealthy, but not how many people have an equitable share of that wealth. For instance, it doesn’t measure how growth is distributed, who exactly is benefitting, or its environmental or social impact. Even Simon Kuznets, the economist widely considered the architect behind the GDP measure, held that it wasn’t how economic welfare should be assessed.

That is why we’ve launched the Prosperity & Inclusion City Seal and Award (PICSA Index). This is the first non-commercial city score, which provides a comparative analysis of inclusive prosperity in more than 100 cities across the globe. The index measures factors such as the affordability of housing and access to education and healthcare as well as GDP per capita.

It is the first time that the world’s major cities have been ranked not just by the size and health of their economy, but for their efforts to build inclusive and prosperous environments for all of their citizens.

The PICSA index ranks these cities according to how they perform under three pillars. The first, ‘Prosperity’, uses empirical quality of life measures as well as GDP to form the statistical foundation for the index. The second pillar, ‘Social Inclusion’, focuses on personal safety, access to quality education, and internet access. The third pillar, ‘Spatial Inclusion’, examines environmental quality, affordability of housing, and access to healthcare.

European cities dominate the top of the rankings, with 15 of the top 20 from the continent. Zurich is ranked as the number one city, scoring strongly across all measures, particularly on quality of life, work, housing, leisure, safety, and education – with the Swiss higher education system attaining an especially high score. Vienna is in second place, scoring close to top marks on healthcare. The Austrian capital has an extremely high density of physicians per capita, making it the home of one of Europe’s best healthcare systems, where there are virtually no waiting times for citizens.

But perhaps just as notable as which cities have made the top 20 is which cities do not. In a sign of how conventional measures of prosperity have become poor barometers in judging economic success and equity of opportunity, the ten richest cities in the world have not scored well for inclusive prosperity. London is the highest ranked of these cities, but comes in 33rd place. London may have an economy larger than most European nations, but it also suffers from high levels of inequality, with over a quarter of its residents in poverty. The index found London performs badly for spatial inclusion, notably in the area of housing affordability and environmental quality. Meanwhile, New York City is ranked 38th. In short, many of the world’s wealthiest cities are failing to create inclusive economies for their citizens.

The index was commissioned by Basque institutions and launched in Bilbao because the city is aiming to do all it can to tackle issues of modern income inequality and build a society that is prosperous for all its inhabitants. Bilbao itself ranks 20th in the index. We know there is more to do to realise that vision.

There is also more work to do in assessing other factors that contribute to an equitable and inclusive society. So, in time, the index will be extended to measure a combination of tangible and intangible measures, such as how we measure racial equality and the inclusiveness of social bonds within a city.

This is the start of that journey. We want this inaugural index to kick-start a debate on why we need a new measure of economic productivity that goes beyond GDP to provide a holistic account of how well people are doing in the economy and which cities have the populations that are most empowered to contribute to its economy and share in its benefits.

In the same way that the best companies measure their corporate and social responsibility as well as their profits, so cities should take account of the inclusivity of the wealth they create.

Bobby Kennedy famously said that GDP “measures everything in short, except that which makes life worthwhile”. The PICSA index is intended to meet Kennedy’s challenge, and can play a vital role in driving cities’ efforts to create an economically just and inclusive world.

Asier Alea Castaños is director of strategic programmes of the Regional Council of Biscay.


A new wave of remote workers could bring lasting change to pricey rental markets

There’s a wide world of speculation about the long-lasting changes to real estate caused by the coronavirus. (Valery Hache/AFP via Getty Images)

When the coronavirus spread around the world this spring, government-issued stay-at-home orders essentially forced a global social experiment on remote work.

Perhaps not surprisingly, people who are able to work from home generally like doing so. A recent survey from iOmetrics and Global Workplace Analytics on the work-from-home experience found that 68% of the 2,865 responses said they were “very successful working from home”, 76% want to continue working from home at least one day a week, and 16% don’t want to return to the office at all.

It’s not just employees who’ve gained this appreciation for remote work – several companies are acknowledging benefits from it as well. On 11 June, the workplace chat company Slack joined the growing number of companies that will allow employees to work from home even after the pandemic. “Most employees will have the option to work remotely on a permanent basis if they choose,” Slack said in a public statement, “and we will begin to increasingly hire employees who are permanently remote.”

This type of declaration has been echoing through workspaces since Twitter made its announcement on 12 May, particularly in the tech sector. Since then, companies including Coinbase, Square, Shopify, and Upwork have taken the same steps.

Remote work is much more accessible to white and higher-wage workers in tech, finance, and business services sectors, according to the Economic Policy Institute, and the concentration of these jobs in some major cities has contributed to ballooning housing costs in those markets. Much of the workforce that can work remotely is also more able to afford moving than those on lower incomes working in the hospitality or retail sectors. If they choose not to report back to HQ in San Francisco or New York City, for example, that could potentially have an effect on the white-hot rental and real estate markets in those and other cities.

Data from Zumper, an online apartment rental platform, suggests that some of the priciest rental markets in the US have already started to soften. In June, rent prices for San Francisco’s one- and two-bedroom apartments dropped more than 9% compared to one year before, according to the company’s monthly rent report. The figures were similar in nearby Silicon Valley hotspots of San Jose, Mountain View, Palo Alto.

Six of the 10 highest-rent cities in the US posted year-over-year declines, including New York City, Los Angeles, and Seattle. At the same time, rents increased in some cheaper cities that aren’t far from expensive ones: “In our top markets, while Boston and San Francisco rents were on the decline, Providence and Sacramento prices were both up around 5% last month,” Zumper reports.

In San Francisco, some property owners have begun offering a month or more of free rent to attract new tenants, KQED reports, and an April survey from the San Francisco Apartment Association showed 16% of rental housing providers had residents break a lease or unexpectedly give a 30-day notice to vacate.

It’s still too early to say how much of this movement can be attributed to remote work, layoffs or pay cuts, but some who see this time as an opportunity to move are taking it.

Jay Streets, who owns a two-unit house in San Francisco, says he recently had tenants give notice and move to Kentucky this spring.

“He worked for Google, she worked for another tech company,” Streets says. “When Covid happened, they were on vacation in Palm Springs and they didn’t come back.”

The couple kept the lease on their $4,500 two-bedroom apartment until Google announced its employees would be working from home for the rest of the year, at which point they officially moved out. “They couldn’t justify paying rent on an apartment they didn’t need,” Streets says.

When he re-listed the apartment in May for the same price, the requests poured in. “Overwhelmingly, everyone that came to look at it were all in the situation where they were now working from home,” he says. “They were all in one-bedrooms and they all wanted an extra bedroom because they were all working from home.”

In early June, Yessika Patapoff and her husband moved from San Francisco’s Lower Haight neighbourhood to Tiburon, a charming town north of the city. Patapoff is an attorney who’s been unemployed since before Covid-19 hit, and her husband is working from home. She says her husband’s employer has been flexible about working from home, but it is not currently a permanent situation. While they’re paying a similar price for housing, they now have more space, and no plans to move back.

“My husband and I were already growing tired of the city before Covid,” Patapoff says.

Similar stories emerged in the UK, where real estate markets almost completely stopped for 50 days during lockdown, causing a rush of demand when it reopened. “Enquiry activity has been extraordinary,” Damian Gray, head of Knight Frank’s Oxford office told World Property Journal. “I've never been contacted by so many people that want to live outside London."

Several estate agencies in London have reported a rush for properties since the market opened back up, particularly for more spacious properties with outdoor space. However, Mansion Global noted this is likely due to pent up demand from 50 days of almost complete real estate shutdown, so it’s hard to tell whether that trend will continue.

There’s a wide world of speculation about the long-lasting changes to real estate caused by the coronavirus, but many industry experts say there will indeed be change.

In May, The New York Times reported that three of New York City’s largest commercial tenants — Barclays, JP Morgan Chase and Morgan Stanley — have hinted that many of their employees likely won’t be returning to the office at the level they were pre-Covid.

Until workers are able to safely return to offices, it’s impossible to tell exactly how much office space will stay vacant post-pandemic. On one hand, businesses could require more space to account for physical distancing; on the other hand, they could embrace remote working permanently, or find some middle ground that brings fewer people into the office on a daily basis.

“It’s tough to say anything to the office market because most people are not back working in their office yet,” says Robert Knakal, chairman of JLL Capital Markets. “There will be changes in the office market and there will likely be changes in the residential market as well in terms of how buildings are maintained, constructed, [and] designed.”

Those who do return to the office may find a reversal of recent design trends that favoured open, airy layouts with desks clustered tightly together. “The space per employee likely to go up would counterbalance the folks who are no longer coming into the office,” Knakal says.

There has been some discussion of using newly vacant office space for residential needs, and while that’s appealing to housing advocates in cities that sorely need more housing, Bill Rudin, CEO of Rudin Management Company, recently told Spectrum News that the conversion process may be too difficult to be practical.

"I don’t know the amount of buildings out there that could be adapted," he said. "It’s very complicated and expensive.

While there’s been tumult in San Francisco’s rental scene, housing developers appear to still be moving forward with their plans, says Dan Sider, director of executive programs at the SF Planning Department.

“Despite the doom and gloom that we all read about daily, our office continues to see interest from the development community – particularly larger, more established developers – in both moving ahead with existing applications and in submitting new applications for large projects,” he says.

How demand for those projects might change and what it might do to improve affordable housing is still unknown, though “demand will recover,” Sider predicts.

Johanna Flashman is a freelance writer based in Oakland, California.